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Rishi Sunak warns people will see ‘economic shock laid bare’ in the Spring



Chancellor Rishi Sunak has warned people will soon see an “economic shock laid bare” as the damage dealt by the coronavirus pandemic becomes ever more apparent, with hard times ahead.

Whilst a £3 billion package of new spending to support the NHS in recovering from the pandemic is expected to be announced in the Spending Review on Wednesday, Mr Sunak said Covid’s impact on the economy must be paid for.

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Borrowing in October hit £22.3 billion, with public sector debt now over £2 trillion, and the chancellor said high levels of borrowing cannot go on “indefinitely”.

The Office for National Statistics said government borrowing last month reached the highest October figure since monthly records began in 1993 – underlining the “substantial effect” the pandemic is having on public finances.

Mr Sunak indicated that taxes may have to start rising next year, and there could be spending cuts, yet whether the economy is in difficulty is a “question of timing”.

Sustainable public finances

Nurses and NHS staff protest after being excluded from a recent pay rise announcement. Almost 900,000 public sector workers have been given an above-inflation pay rise but nurses and junior doctors were not included because they agreed a separate three-year deal in 2018. (Photo: Guy Smallman/Getty Images)

Speaking to The Sunday Times, Mr Sunak said: “People will see the scale of the economic shock laid bare. We can see the data every month, and obviously the shock that our economy is facing at the moment is significant.

“Absolutely the right thing to do is to support the economy, and jobs are my number one priority, but – obviously – you can’t sustain borrowing on this level indefinitely,

“Once we get through [the crisis] we’ll have to figure out what the best way of returning to sustainable public finances is.

“I’m hopeful that by the spring, with positive news on both mass testing and vaccines, we can start to look forward.”

Mr Sunak’s spending review is highly-anticipated, but could also spark industrial action if he confirms the government will impose a pay cap on millions of public sector workers.

Unions have reacted angrily to reports the chancellor would be announcing a pay limit, though frontline NHS doctors and nurses are expected to be exempt.

Labour shadow chancellor Anneliese Dodds urged Mr Sunak on Saturday to use his review to prevent a return to the conditions that allowed the UK to be “so badly hit by the pandemic”.

She said the Chancellor “must lay the foundations for that recovery” in his set-piece financial update on Wednesday to prevent protective equipment stocks dwindling, local services returning to being “on their knees”, and families being left with little savings and “struggling with the cost of living”.

“And that must include working together to build a better, more secure future for our country, so that we do not go back the fragility and instability of the way things were,” she told the Co-operative Party’s local government conference.

Easing pressure on the NHS

Almost 5,000 more people have died from heart problems than would be expected since the start of the coronavirus pandemic, a charity has warned (Photo: Peter Byrne/PA Wire)

The Treasury said the £3bn package for the NHS would help tackle backlogs in the health service, with thousands of checks, scans and operations delayed because of the pandemic.

The number of people waiting a year for treatment has risen from about 1,500 in February to 140,000 in September, the Treasury noted.

While the extra funding only applies to England, the devolved administrations in Scotland, Wales and Northern Ireland will receive equivalent funding via the Barnett formula.

Around £1.5 billion will be used to ease existing pressures in the health service and £500 million will help support mental health services.

Mr Sunak will also unveil the much-delayed National Infrastructure Strategy for £100 billion of long-term spending to help tackle the climate crisis and invest in transport.

He will also alter the Treasury’s “green book”, a set of rules to determine the value of Government schemes which is thought to favour London and the South East of England.